Science

Canada Buys Trans Mountain Oil Pipeline, To Ensure It Gets Expanded

Canada Buys Trans Mountain Oil Pipeline, To Ensure It Gets Expanded

Reactions from leaders of all industries and organizations to the federal government's announcement today (May 29) that it is buying Kinder Morgan Canada Limited's (TSX:KML) Trans Mountain pipeline have been strong.

Morneau said Ottawa is buying Kinder Morgan's existing pipeline, and the rights and assets associated with the planned expansion, calling $4.5 billion a "fair price" for a project with "significant commercial value".

British Columbia Premier John Horgan said the province would push ahead with a court case to establish its right to restrict increased shipments of crude oil to its coastal waters.

"We are left questioning why any company would pursue large capital investment in Canada", said a note to clients by GMP Securities analysts.

"It must be built and it will be built", said Finance Minister Bill Morneau in a televised statement.

The only studies that say the Trans Mountain pipeline will make money for the Canadian economy are reports paid for by Kinder Morgan.

Indemnification means the federal government would legally agree to bear any financial losses incurred by Kinder Morgan because of yet to be defined "politically motivated delays".

The federal Liberals bought Trans Mountain to fulfill their commitment to get Alberta oil to the British Columbia coast after its Houston-based owner threw in the towel on plans to triple the pipeline's capacity in the face of fierce political and public resistance, especially in B.C.




Morneau presented the options during an early-morning cabinet meeting Tuesday before ministers signed off on the chosen option, which comes just days before the company's self-imposed May 31 deadline and is still subject to the approval of Kinder Morgan shareholders.

Access to new oil markets was also key to Canada meeting its Paris climate target because Alberta, the nation's singled largest pollution emitter, agreed to take action against carbon emissions, if it gained access to new markets for its oil.

"So our message today is simple: when we are faced with an exceptional situation that puts jobs at risk, that puts our worldwide reputation on the line, our government is prepared to take action", he said.

"Whether she wins (the election) that's another story, but had this not happened, she was toast", said Bratt, a political scientist at Mount Royal University in Calgary.

What's more, a poll in April found that a growing number and a majority of British Columbians actually support the pipeline project. "We do not believe that this outcome will instill investor confidence in Canada". "We won't stop until the job is done".

But Morneau said the Alberta-British Columbia feud, which led Alberta to boycott British Columbia wines and threaten to cut the neighbouring provinces fuel supplies, "cannot be allowed to fester". After it completes the project, Canada plans to sell the pipeline. To do so, Canada will pay the pipeline's current owner, Kinder Morgan, $4.5 billion in Canadian dollars - about $3.5 billion in USA currency.

Still, the federal government approved the pipeline in November 2016, on the condition that it meet 157 conditions related to its impact on Indigenous communities, environmental impacts and myriad other areas.


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